The ratings for Watania reflect its strong prospective risk-adjusted capitalisation, supported by strong reinsurance protection, a conservative investment strategy and its sound business plan.
Offsetting rating factors are below target results in 2012 and the execution risk Watania faces in the competitive UAE insurance market.
Watania was founded in 2011 as a new company providing all lines of non-life Takaful business. The company currently has offices in Abu Dhabi and Dubai, with plans to expand into the other Emirates during 2013.
Medical is the most significant business line, contributing 72% of gross written premiums (GWP) and 81% of net premiums in 2012.
Watania benefits from strong risk-adjusted capitalisation with sufficient capital to support current and prospective underwriting levels. Risk-adjusted capitalisation benefits from a low level of retained insurance risk supported by a well rated reinsurance programme and a conservative fixed income focused investment portfolio.
Watania’s performance in 2012 was below its plan in terms of GWP and profitability. Watania’s overall portfolio in 2012 was more biased towards medical business than expected. Due to lower volume overall the company was less able to cover its high initial expenses. The loss for 2012 was Dhs10.5m ($2.9m).
Watania’s enterprise risk management is viewed as developing with a strong structure being implemented over the course of 2013. The company has a financial analysis tool, which will be used to monitor capital adequacy and shape business plans as well as reinsurance optimisation and pricing strategy.
Watania has entered a very competitive market place and will face pricing pressure from both takaful and general insurance providers, which may present difficulty in achieving ambitious premium volume targets. However, the company benefits from strong management and a good understanding of insurance risk control. In the future, positive or negative rating pressures are likely to result from Watania’s ability to successfully execute its business plan.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include: ‘Evaluating Country Risk’; ‘Understanding Universal BCAR’; ‘Understanding BCAR for Property/Casualty Insurers’; ‘Rating New Company Formations’; ‘Rating Takaful (Shari’a Compliant) Insurance Companies’; ‘Rating Members of Insurance Groups’; and ‘Risk Management and the Rating Process for Insurance Companies’.
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.
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